The bank’s one-year MCLR now stands at 8.9%, on par with larger rivals State Bank of India and ICICI Bank.

MCLRs on overnight borrowings and loans with tenures between one month and three years will now range between 8.7% and 9.05%.

Banks review their MCLRs every month.

The rate cut by HDFC Bank was accompanied by reduction in deposit rates. The bank now pays interest at the rate of 6.9% on one-year deposits of under R1 crore, compared with 7% earlier. Two- and three-year deposits under R1 crore will earn 6.25%, as against 7% earlier. One-, two- and three-year deposits of above R1 crore will attract 6.25%, down from 6.5% earlier.

YES Bank has also cut the MCLR on one-year loans by 15 bps to 9.1%. MCLRs on loans of other tenures at the bank now range between 8.4% and 8.85%, as against a range of 8.5% to 9.2% earlier.

As deposits with the banking system continue to rise as a result of the demonetisation of high-value currency notes and interest rates on term deposits drop, banks are taking the opportunity to pass on the benefit of the fall in cost of funds to borrowers.

Banks have received deposits worth R8.11 lakh crore between November 10 and November 27, according to the Reserve Bank of India.